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When InsurTech newcomer Lemonade arrived on the U.S. insurance scene last year, it offered peer-to-peer policies, payback schemes and a little advice: “Forget everything you know about insurance.”

That advice is for customers, but it seems that Canadian industry players are already taking it to heart. Lately, both insurers and brokers have proven that startups aren’t the only ones who can rethink a 350-year-old business.

With strategic digital investments and reimagined online offerings, it would appear that the hyped industry “disruption” is already underway—from within. But is it enough to keep Silicon Valley out?

Disruption 101

Insurance players don’t have a reputation as digital trailblazers—a recent McKinsey & Co. report puts the industry behind the travel and retail sectors, amongst others, on digital capabilities and “maturity,” but they’re definitely borrowing from the “disruptor” playbook. “[Startups] have taken technology that exists and thought about how to enable better experiences,” says Michael Shostak, senior vice-president and chief marketing officer at Economical Insurance. “It’s not that they have better technology, just that they [found] a customer problem and used tech to solve it.”

That’s the mindset behind Sonnet, the company’s direct-to-consumer business, which uses a new digital platform and data analytics to simplify insurance transactions. For example, fewer targeted questions gather enough information for customized product recommendations and a quote. Every touchpoint is intuitive, says Shostak, noting that even the smallest point of contact—like a confirmation notice or an error message—is treated as a customer experience.

Aviva Canada has also adopted a more entrepreneurial mindset, making key investments in ventures like its own Digital Garage, pitch days and partnerships with startups at Ryerson University’s DMZ tech incubator. The goal: bring developers and insurance insiders together to anticipate—and respond—to consumer needs, says Ben Isotta-Riches, the company’s chief information officer.

A recent hackathon had brokers and developers working on digital pink slips, that would let drivers show proof of insurance on their phones, chatbots for broker-client exchanges, and an information-sharing platform for brokers, underwriters and claims adjusters. The overall strategy isn’t to “digitize the channel,” notes Isotta-Riches, but “about how digital is changing the way people live their lives … we need to think about how to support them through insurance.”

The taxi industry… was blindsided by Uber because they didn’t share resources. [It] built better silos, and Uber came along and said, ‘We don’t need you.’”

Tech-based efforts are also helping with something more fundamental—getting customers to really understand insurance. In some cases, that means making the whole process—from risk to pricing— more transparent, says Hugh McTavish, whose online brokerage, InsureMy.ca, focuses on data, rather than digital prowess to clarify consumer behaviour and the ultimate price. At present, InsureMy uses telematics to improve fleet performance and pricing, but is poised to bring those benefits to young drivers with its New Driver Intelligence program in the first quarter of 2017.

Collaboration or cross-purposes?

Such efforts have created good momentum, but, McTavish points out, as each player pursues its own strategy, they may wind up working at cross-purposes. “It would be more efficient if there were some open communication,” he says.

The McKinsey report, The Hallmarks of Digital Leadership in P&C Insurance, recommends closer internal collaboration within insurance companies, noting that, along with a clear strategy and the right tech investments, successful insurance innovators have a “collaborative mindset” that helps bring their digital strategies to fruition.

More broadly, the collaboration question puts a new spin on a long-standing issue, says Dario Battista, founder and president of isure.ca. Brokers have talked about solutions to multiple policy systems and portals for years, and digital efforts continue that conversation, albeit on a different level. “The industry is better,” he acknowledges, “but they’re just building better silos.”

He points to the travel industry for comparison, noting that its billing has been on a single system for years. Anyone buying a ticket to Australia, for example, could go to an independent agent, and pay however they wanted, and the agent would get their commission, Quantas Airlines would get paid, and the traveller could be on their way.

That foundation actually helped that industry hold its ground in the face of aggregators like Expedia.ca, he points out. The taxi industry, on the other hand, was blindsided by Uber because they didn’t share resources. “The taxi industry built better silos, and Uber came along and said, ‘we don’t need you.’”

All in it together

There are pros and cons to collaboration, brokers say. On the plus side, it would redirect resources currently spent on basic transactions and focus them on “finding better ways to serve customers better,” says Battista. Those efficiencies would let brokers hone in on specific customers and build targeted experiences for them, he says. “I could have better training, give customers better resources [and] look for opportunities that are hard to get today.”

[Oversharing] could take away some of the competitiveness and drive to find better ways to do something.”

However, Catherine Smola, president and CEO of the Centre for Study of Insurance Operations (CSIO), points out that brokers are already quite open about their digital efforts—“they’re not afraid to share.” A bigger stumbling block might be digital readiness: CSIO data shows that 11 per cent of brokers don’t have a website and 95 per cent aren’t using simple digital tools like e-signatures, she says.

Shostak agrees that collaboration is already underway— although the systems the company developed with its Guidewire platform were aimed at the direct sales experience, next steps will translate some of those benefits to brokers, giving them a similarly intuitive experience for their own transactions.

Both Aviva and Kanetix have divisions focused on offering brokers digital support—for everything from websites to more sophisticated tools like apps. “Digital is not brokers’ expertise,” notes May. “Many are gunshy about spending more because they have not seen ROI in previous efforts.”

Still, there may be drawbacks to oversharing, as well. “It could take away some of the competitiveness and drive to find better ways to do something,” says McTavish. What’s more, he points out, startups aren’t worrying about common ground—“they’re thinking ‘let’s blow this up,’ and then they start thinking about commonality.”

Future shock

While the industry has made strides, it hasn’t fully achieved disruptor status—yet. “You can see there are some parts of the industry that have really committed to a different vision of the future, but there are parts that haven’t,” notes Isotta-Riches.

Part of that disconnect stems from a company or broker’s particular approach to innovation. “A lot of organizations start that transformation from the inside out. They’re done as business transformation—‘we’ll be more agile, quicker’—but [they don’t] put the customer lens on that,” says Shostak.

It may be that those disconnects [between insurer and broker]— rather than a lack of common platform— make way for the predicted, external disruptor.”

Or, insurers may not consider broker strengths when rolling out a new initiative. Some brokers are doing well with a traditional service model, McTavish points out. “Not all brokers need to be doing stuff like this.” Instead of a company telling brokers, ‘Here’s a great thing that doesn’t fit with your operation,’ [there should be] a discussion around ‘This is what we’re doing, do you see yourself fitting in here?’ from both company to broker and broker to company,” he says.

It may be that those disconnects—rather than a lack of common platform—will make way for the predicted, external disruptor. McTavish recalls an InsurTech conference speaker advising attendees that “start-ups are going to overestimate their impact on the insurance industry and the insurance companies are going to underestimate them”. He notes that the industry might be watching for a huge interloper, when the true disruption will come in more incrementally: “I don’t think it’s going to be a huge home run that everyone will flock to.”

Amazon’s retreat from the industry early last year underscores that point, and while others in the industry have pointed to a lack of deep industry knowledge or to a knotty regulatory system as barriers to third-party entry, Shostak makes one observation:

“Uber operates in a regulated environment,” he says. “They had so much customer support, it was hard to stop them in their tracks.”